Markets and Power

By Schutz, Eric | Journal of Economic Issues, December 1995 | Go to article overview

Markets and Power


Schutz, Eric, Journal of Economic Issues


Mainstream economists have paid scant attention to the concept of social power and its ramifications for their discipline. Elsewhere in the social sciences - in sociology, political science, and history - the concept of power has an importance equivalent to that of, say, the concept of the molecule in chemistry. But the majority of economists avoid serious acknowledgement that power might have anything to do with the primary concerns of their field. Markets and market systems, in their view, constitute a sphere of life in which people are remarkably free of the entanglements of social power.

The exclusion is partly the result of relative inattention to the theory of imperfect markets. Economists do recognize the presence of power structures in imperfect markets where monopoly or government price-controls exist but have considered the theory of market imperfection to be a mere accessory to that of "perfect" markets. And mainstream economists completely disregard those "extra-market" power structures that necessarily undergird all market systems, even hypothetically "perfect" ones, especially those power structures involved in determining the "property endowments of transactors."

From the viewpoint of the other social sciences, such neglect suggests ideological, rather than scholarly, motivations at the heart of mainstream economics. Be that as it may, heterodox economists - institutionalists as well as Post Keynesians, neo-Ricardians, radicals, and Marxians - have long insisted on the fundamental importance of both economic and other forms of power. Recently their views on the subject have been brought to the forefront as a number of heterodox authors have offered analyses of power in markets in terms used in the familiar neoclassical paradigm itself.(1) In social theory, too, the most appealing "models" of power recently advanced by philosophers, sociologists, and political scientists have been framed in choice-theoretic terms very similar to those of neoclassical economics.(2) These developments in social theory and heterodox economics suggest at least the possibility that mainstream economics might be induced to rejoin the rest of the social sciences in fully accepting power as a fundamental area of inquiry.

Yet in order for that to occur, there is more that needs to be done by heterodox economists, for the "models" of power they have offered remain inadequate. Either they have not been carefully enough specified to satisfy the requirements of skeptical mainstream economists or else they have not been comprehensive enough to encompass the important attributes of power with which economists ought to be concerned.(3) This article is an attempt to correct some of these problems by outlining a model of power that is both comprehensive and applicable to the concerns of economists. The model will be used to illustrate, by means of a broad sketch, some of the major power structures extant in market economies.

I approach power here as a "one-on-one" relationship between individuals. This is not a concession to methodological individualism. It is recognition that, whatever else may be said about the broader social institutions and structures that constitute or undergird power relationships, such relationships are a form of association among individuals. Approaching power in this manner - rather than by completely subsuming the analysis of individual relationships in that of group or institutional relationships - is part of what is necessary for a comprehensive model of power: in principle, such a model must accommodate not only such things as general class relations, but also, for example, gender relations and parent-child relations in families. This approach also facilitates, as a more "structural" approach would not, a focus upon a particular attribute of power relationships that has been neglected not only by mainstream economists, but also by many heterodox economists as well. The essence of power relationships, I argue, is that subordinate individuals may be induced to act for other people's benefit without full consent. …

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